TOKYO: Japanese government bond yields sank to one-month lows on Monday as the Bank of Japan (BOJ) used its updated lending facility to add a trillion yen in funds to the market.
The 10-year JGB yield sank 2-1/2 basis points (bps) to 0.375% as of 0615 GMT, bringing it close to last Wednesday’s low of 0.36%, when the BOJ defied pressure from bond bears and kept stimulus settings unchanged.
The central bank did, however, expand an existing market operation tool that day, so that it could pump funds extending up to 10 years in variable rates to financial institutions against collateral.
It offered 1 trillion yen in 5-year funds and received bids for about three times that amount.
“It’s a relatively strong measure to guide medium-term interest rates lower,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management. “Of course, there’s still debate to what extent this measure will be effective,” he added.
Japan yields tumble below policy cap after BOJ keeps status quo
“But at least for some time, whether several weeks or several months, it will have some impact in lowering long-term yields, or at least preventing them from rising too much.”
Benchmark 10-year JGB futures closed 0.63 yen higher at 147.63.
Earlier, they touched a one-month high of 147.74. The five-year yield fell 2.5 bps to 0.165%, a one-month low. The two-year yield fell 1 bps to -0.020%, also the lowest in a month.
The 20-year JGB yield fell 2.5 bps to 1.255%, a four-week low, while the 30-year JGB yield was flat at 1.550%.
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